Honda begins airlifting steel from Japan to plants in U.S.

U.S. automakers facing higher domestic costs

July 10, 2002|By BLOOMBERG NEWS

TORRANCE, Calif. - Honda Motor Co. Ltd. has started airlifting carbon sheet steel from Japan to U.S. plants as automakers cope with below normal domestic supplies and higher costs.

The Tokyo-based automaker flew in 200 tons of steel last week for North American plants. An additional 2,000 tons might be needed, spokesman Ron Lietzke said.

Toyota Motor Corp., which buys almost all of its steel in North America, expects to pay $100 million a year more for the material, and auto parts makers such as Delphi Corp. and Dana Corp. said they might shut plants because U.S.-imposed tariffs on imported steel have raised prices and demand for domestic steel.

Steelmakers are renegotiating contracts after President Bush imposed tariffs in March of as much as 30 percent to protect companies such as U.S. Steel Corp. and Bethlehem Steel Corp. from overseas rivals. Shortages for Honda and other companies are partly the result of U.S.-based manufacturers' efforts to buy more domestic steel not subject to tariffs, analysts said.

"It's a huge problem, and we're hearing about a lot of availability problems for many types of steel right now," said Jim Gillette, vice president of consulting firm IRN Inc.

Honda's U.S. plants get more than 90 percent of their steel from domestic suppliers. The steel will be used to make models such as Odyssey minivans, Civic and Accord sedans and the Acura MDX sport-utility vehicle. Honda expects supplies to return to normal in a few months, Lietzke said.

"A big price [increase] on steel is bound to eventually tack a few hundred dollars onto the cost of an automobile," said Brink Lindsey, a trade analyst at Washington's Cato Institute, which opposes the tariff.

Lindsey declined to estimate the cost to Honda.

Honda's American depositary receipts, each representing half an ordinary share, fell 32 cents yesterday to close at $20.90 on the New York Stock Exchange.

Toyota is able to buy 95 percent of its steel in North America, letting the automaker avoid airlifting, said Dennis Cuneo, senior vice president of Toyota's North American manufacturing. The $100 million more in annual material costs will add about $100 to the cost of each car and truck, he said.

Delphi, Dana and other U.S. auto parts makers said last month that they might have to shut factories, disrupting automakers' production, because tariffs led to higher prices and tighter supplies.

The cost of raw materials to those suppliers has increased 20 percent to 50 percent because of the tariffs, the Original Equipment Suppliers Association and the Motor & Equipment Manufacturers Association trade groups said in a letter to Bush.

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